Commods lead FTSE rally, Fed sparks QE2 fever

Published 10/13/2010, 04:40 AM
Updated 10/13/2010, 04:44 AM
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* FTSE up 1.2 percent as Fed minutes point to further QE

* Miners and energy stocks rise after Asian data

* ARM climbs after Intel results

By David Brett

LONDON, Oct 13 (Reuters) - Britain's leading shares rose early on Wednesday led by commodity stocks after upbeat economic data overnight from Asia, and as the prospect of further quantitative easing in the U.S boosted appetite for risk.

By 0806 GMT, the FTSE 100 index was up 69.66 points, or 1.2 percent, at 5,731.25 back up around highs last seen at the end of April, and having closed down 0.2 percent, at 5,661.59 on Tuesday.

Miners and energy stocks were among the top gainers with copper hitting a 27-month high as Japanese machinery orders rose more than expected and after the Chinese government said it will promote sales of construction material in rural areas.

Mexican precious metals miner Fresnillo added 4.1 percent after it said its silver and gold production rose to a record in the third quarter, beating expectations, and reiterated that it is on track to meet its full-year targets.

Crude rose above $82 per barrel, supported by soaring Chinese crude imports. Oil majors BP and Royal Dutch Shell gained 1.8 and 1.3 percent respectively.

Petrofac rallied 5.1 percent along with European oil services firms after Washington lifted its ban on deepwater drilling seven weeks ahead of schedule.

Expectations that the U.S. Federal Reserve is poised to bolster the economy spurred something of a worldwide equity rally, as the FTSE echoed bullish overnight performances on Wall Street and in Asia.

Details from the Fed's latest meeting showed the U.S. central bank may soon feed markets with cheap cash to further boost growth.

"We saw from the FOMC minutes that there is little doubt that a further round of QE is likely to happen at the next meeting," David Morrison, market strategist at GFT Global said.

"That is weakening the dollar and causing a pavlovian reaction, and it's risk on and everything gets bought."

ARM CHIPS IN

UK chipmaker Arm Holdings was up 3.4 percent gaining momentum after stronger-than-expected third-quarter results and a forecast for better sales in the fourth quarter from U.S. peer Intel.

Hammerson climbed 3.2 percent after Goldman Sachs upgraded its rating for the real estate group to "Conviction Buy" from "neutral".

Banks, however, failed to join the party as Asia-focused Standard Chartered, down 3.2 percent, announced plans to raise $5.3 billion via a rights issue.

Barclays dropped 2.5 percent as traders speculated that the UK bank may have to raise up to 8 billion pounds due to forthcoming tighter regulatory capital requirements, based on Standard Chartered's move.

U.S. bank JPMorgan results are expected at 1100 GMT.

Elsewhere, Burberry slipped 3.6 percent as some analysts questioned whether a small upgrade in profit guidance was enough to sustain recent strong gains.

British consumer confidence fell in September to its lowest level in a year, a Nationwide survey showed, in another sign that a coming round of spending cuts is souring the public mood.

Ex-dividend factors knocked 1.77 points off the index with Cobham, Old Mutual, Tesco and Smith & Nephew all losing payout attractions. (Editing by Hans Peters)

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